ND-4/PJ/PJ.02/2025 regarding Affirmation of Tax Treatment for Management of Apartments

The Directorate General of Taxes (DGT), through its Official Memorandum No. ND-4/PJ/PJ.02/2025, has provided legal certainty regarding tax compliance obligations and clarified the Income Tax (PPh) and Value-Added Tax (VAT) treatment for apartment building management. This memorandum is officially addressed to directors within the DGT, Head of Regional Tax Offices, Head of Information and Complaint Service Offices (KLIP), and Head of Tax Offices.

Under existing regulations, owners are required to establish a legal entity called the Apartment Owners and Residents Association (PPPSRS/Perhimpunan Pemilik dan Penghuni Satuan Rumah Susun), which is responsible for managing the collective interests of owners and residents regarding common areas, shared facilities, and shared land.

In managing the apartment building, PPPSRS may establish or appoint a Building Management with following responsibilities:

1. conducting operational and maintenance of the apartment building.
2. monitoring the utilization of common areas, shared facilities, and shared land according to their designated purposes.
3. submitting development proposals for building maintenance and improvement based on apartment management evaluations to the PPPSRS board.
4. providing periodic report to the PPPSRS board.
5. executing tasks assigned by the PPPSRS board; and
6. submitting accountability reports to the PPPSRS board regarding management operations at year-end.

The PPPSRS income resulted from:

1. regular member contributions (Owners or Residents) of PPPSRS, which may include:
2. Environmental Management Fees (IPL), and
3. reserve funds (sinking fund).
4. other legitimate business activities, namely income obtained from the utilization or optimization of common areas, shared facilities, and shared land, which may include:
5. rental of meeting rooms, rental of base transceiver station (BTS) poles, placement of ATM machines, internet networks, installation of advertising media, and/or other forms of utilization.
6. management businesses and/or companies owned/established by PPPSRS, as well as collaboration results with PPPSRS and/or the Management; and
7. other sources that do not conflict with the articles of association and bylaws.

Before the PPPSRS is established, the Apartment Developer—whether from the government or private sector—is responsible for managing the apartment for a maximum of one year after the first unit is handed over to the owner. This transitional period is crucial to allow residents to understand apartment management practices and properly establish the PPPSRS. Additionally, the PPPSRS is required to record all income and expenditures in bookkeeping that complies with financial accounting standards, ensuring fund management remains transparent and accountable.

Based on the above explanation, it can be concluded that there are 3 (three) parties authorized to manage an Apartment Unit:

1. PPPSRS
2. Apartment Developer
3. Building Management formed or appointed by the PPPSRS

The clarification regarding the treatment of VAT and Income Tax on Apartment Management is as follows:

1. VAT Treatment

1. VAT Treatment for PPPSRS.
2. Services provided by PPPSRS to Owners or Residents (whether for residential or mixed-use functions) through the collection of regular contribution is not categorized as delivery of taxable service. Therefore, it is not subject to VAT.
3. Delivery of Taxable Goods and/or Taxable Services by PPPSRS to third parties—derived from legitimate business activities related to the utilization of common areas, shared facilities, or shared land—is subject to VAT in accordance with prevailing tax laws.
4. PPPSRS must register as a Taxable Entrepreneur if its gross revenue from legitimate business activities exceeds the small business threshold, which is IDR 4,800,000,000 (four billion eight hundred million Rupiah).
5. VAT Input on the acquisition of Taxable Goods/Services, import of Taxable Goods, or utilization of intangible Taxable Goods/Taxable Services from outside the Customs Territory may be credited, provided it complies with input tax credit regulations under prevailing tax laws.

• VAT Treatment for Apartment Developer.
• If the Developer acts as the Building Management (prior to PPPSRS establishment), services provided by the Developer are subject to VAT.
• The supply of Taxable Goods and/or Taxable Services by the Developer to third parties—related to the utilization of common areas, shared facilities, or shared land—is subject to VAT per applicable tax regulations.

• VAT Treatment for Building Management
• The delivery of Taxable Goods and/or Taxable Services by the Building Management (to PPPSRS or third parties) is subject to VAT under prevailing tax laws.
• The Building Management must register as a Taxable Entrepreneur if its gross revenue exceeds the small business threshold specified in the Ministerial Regulation on VAT small business limits.

• Income Tax Treatment

1. Income received or earned by PPPRS is taxable income and must be recorded in accordance with Financial Accounting Standards, unless tax regulations stipulate otherwise.

• If the income received or earned by PPPRS falls under the provisions of Article 4(2) of the Income Tax Law, such income shall be subject to final income tax in accordance with prevailing tax regulations.

• Income Tax Treatment for PPPSRS.
• PPPSRS is a corporate Taxpayer and must register to obtain a Tax Identification Number (NPWP).
• Regular member contributions in the form of IPL received by PPPSRS from Owners or Residents (for residential or mixed-use functions) are subject to income tax, but not subject to withholding tax deduction from Owners or Residents.
• Regular member contributions in the form of sinking funds received by PPPSRS from Owners or Residents (for residential or mixed-use functions) are recorded as deposits/loans from Owners or Residents. The income is recognized only when the sinking fund is used for the rehabilitation of common areas, shared facilities, or shared land.
• No income tax withholding or collection is required from Owners or Residents for sinking funds received by PPPSRS.
• Expenses related to income may be deducted from gross income at the time the expenses are incurred or charged.
• Income from other legitimate business activities received by PPPSRS is subject to income tax, and tax withholding/collection or self-payment/deposit of tax must be applied per tax regulations.
• PPPSRS must withhold and/or collect income tax from third parties, including the Building Management, in accordance with tax laws.

• Income Tax Treatment for Apartment Developer.
• If the Developer acts as the Building Management (due to PPPSRS not yet being established), regular contributions (IPL & sinking funds) received from Owners or Residents (for residential or mixed-use functions) are subject to income tax, but not subject to withholding tax deduction from Owners or Residents.
• Income from other legitimate business activities received by the Developer is subject to income tax, and tax withholding/collection or self-payment/deposit of tax must be applied per tax regulations.

• Income Tax Treatment for the Building Management.
• The Building Management is a corporate Taxpayer and must register to obtain NPWP.
• Income received from PPPSRS is subject to income tax, and tax withholding/collection must be applied per tax regulations.
• The Building Management must withhold and/or collect income tax from third parties in accordance with tax laws.

Untuk Bantuan Layanan Pajak, silakan hubungi :

            Rani Widianti

            T. (+6221) 2222-0200 tanggal 2222-0200

            Bahasa Indonesia: E. rani.widianti@shinewing.id

            Alvina Oktavia

            T. (+6221) 2222-0200 tanggal 2222-0200

            E. alvina.oktavia@shinewing.id